Current Account Developments in New Member States of the European Union: Equilibrium, Excess, and EU-Phoria

April 1, 2008

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Jesmin Rahman. Current Account Developments in New Member States of the European Union: Equilibrium, Excess, and EU-Phoria, (USA: International Monetary Fund, 2008) accessed November 8, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper analyzes current account (CA) developments in the following 10 new EU members states: Czech Republic, Bulgaria, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia. During the last 15 years, these countries, on average, have run CA deficits that are considerably higher than the average CA deficit of other developing countries. However, more recently, a diverging pattern has emerged among these countries with one group, consisting of the Baltic countries, Bulgaria and Romania, experiencing rapid widening, while the others seeing a stabilization in their CA balances. Using panel data for 59 countries, this paper empirically investigates the following three questions: Are higher average deficits in EU-10 explained by medium-term macroeconomic fundamentals? What explains the diverging CA behavior among EU-10? And finally, how challenging is it for the group experiencing rapidly widening CA deficits to reverse the trend?

Subject: Exports, Fiscal stance, Foreign direct investment, Output gap, Trade balance

Keywords: CA balance, CA deficit, CA norm, Norm regression, WP

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2008/092
Stock No:

WPIEA2008092
ISBN:

9781451869538
ISSN:

1018-5941

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